COMPANY

A Company is a form of business which is a legal entity that is separate and distinct from its shareholders and directors. Therefore, a company can sue or be sued, carry out transactions and contracts, hire and fire employees, and purchase properties in its name. A company’s shareholders have limited liability and are not liable for debts and losses of the company beyond their invested amount. A company’s profits are taxed at corporate tax rates. The three common types in Singapore are described later in this article.

Registration Requirements

A minimum of one shareholder.

A minimum of one director who is at least 18 years old and a Singapore Citizen/ Singapore Permanent Resident/ Employment Pass Holder/ Dependant Pass Holder.

A foreigner can act as a local director by applying for an EntrePass from the Ministry of Manpower.

An undischarged bankrupt needs an approval from the court or Official Assignee before he/she is allowed to manage a business.

The incorporation fee is $300.00 and the business name application fee is $15.00.

1. Exempt Private Company (EPC)

EPC is currently the preferred and most common business type in Singapore because of its reduced compliance requirements.

ADVANTAGES:

Instead of filing annual audited accounts, EPC has to submit:

An annual declaration of solvency, signed by the directors and company secretary, or

An annual unaudited accounts to ACRA (The Accounting and Corporate Regulatory Authority).

An EPC has a low statutory requirements in comparison to non-exempt private companies or public companies.

EPC’s shareholders are liable only up to the amount that are invested in the company. The most that a shareholder loses is the value of his or her shares.

Retain control over who own the company, as capital is gained through selling its shares privately.

The founder of the company usually retains the majority of ownership, while partial ownership maybe granted to business partners, various investors, or even employees, at the discretion of the founder.

Unlike a Public Company, the account books remain confidential and is not open to public scrutiny.

Reasonable access to capital as the maximum number of shareholders allowed is 20.

Can exist perpetually, as business is not affected by the status of the owners.

DISADVANTAGES:

More expensive to set up and maintain in comparison to sole-proprietorship and partnership.

The profits of the business must be shared among all its directors and shareholders.

Growth is limited to the maximum of 20 shareholders.

Shareholders may need the agreement of the other shareholders when they want to sell or transfer their shares.

Subject to adherence to some government regulations.

2. Private Limited Company (PLC)

A private limited company is privately owned by shareholders of between 2 to 50 individuals, who usually are family, friends and relatives.

Shares of a PLC may not be offered to the general public.

ADVANTAGES:

PLC’s shareholders are liable only up to the amount that are invested in the company. The most that a shareholder loses is the value of his or her shares.

Retain control over who own the company, as capital is gained through selling its shares privately.

The founder of the company usually retains the majority of ownership, while partial ownership maybe granted to business partners, various investors, or even employees, at the discretion of the founder.

Unlike a Public Company, the annual reports and account books remain confidential and is not open to public scrutiny.

Greater access to capital as the maximum number of shareholders allowed is 50.

Greater pool of skills

Can exist perpetually, as business is not affected by the status of the owners.

DISADVANTAGES:

More expensive to set up and maintain.

The profits of the business must be shared among all its directors and shareholders.

Growth is limited to the maximum of 50 shareholders.

Shareholders may need the agreement of the other shareholders when they want to sell or transfer their shares.

Subject to extensive government regulations:

Annual returns must be filed.

Must appoint a company secretary within 6 months of incorporation.

Must appoint an auditor within 3 months of incorporation.

Adherence to various statutory requirements for general meetings, directors, company secretary, share allotments, etc.

3. Public Company

A public company differs from a private company by how the firm obtains funds. While a private company must sell shares privately, a public company sell its shares on the public stock exchange and are issued through an initial public offering. Thus, trading of company stocks are conducted in the open market.

Privatization can occur if an individual(s) – usually the initial owner(s) or director(s) – or a company purchase back all available shares, gaining majority control of the company.

ADVANTAGES:

Able to raise substantial additional capital for operation or expansion.

In a strong market, a well-run public company with a healthy profit stands to benefit from tremendous financial gain as the price of its shares shoot up.

DISADVANTAGES:

More expensive to set up and maintain.

Shareholders own the company proportional to the number of shares they own and they can vote to make decisions in the company, regardless of their histories or relationships to the company before they purchased the shares.

It is not impossible for the original owner to be forced out of power completely if a big investor buys most of the company.

In a weak market, a public company can face trouble due to a market crash that may cause investors to sell their shares.

Increased mandatory financial disclosures allow competitors to gain some insights of how the business is run.

Subject to extensive government regulation:

Annual returns must be filed.

Must appoint a company secretary within 6 months of incorporation.

Must appoint an auditor within 3 months of incorporation.

Adherence to various statutory requirements for general meetings, directors, company secretary, share allotments, etc.